The Case for Deeply Negative Interest Rates

Only monetary policy addresses credit throughout the economy. Until inflation and real interest rates rise from the grave, only a policy of effective deep negative interest rates, backed up by measures to prevent cash hoarding by financial firms, can do the job.

CAMBRIDGE – For those who viewed negative interest rates as a bridge too far for central banks, it might be time to think again. Right now, in the United States, the Federal Reserve – supported both implicitly and explicitly by the Treasury – is on track to backstop virtually every private, state, and city credit in the economy. Many other governments have felt compelled to take similar steps. A once-in-a-century (we hope) crisis calls for massive government intervention, but does that have to mean dispensing with market-based allocation mechanisms?

Blanket debt guarantees are a great device if one believes that recent market stress was just a short-term liquidity crunch, soon to be alleviated by a strong sustained post-COVID-19 recovery. But what if the rapid recovery fails to materialize? What if, as one suspects, it takes years for the US and global economy to claw back to 2019 levels? If so, there is little hope that all businesses will remain viable, or that every state and local government will remain solvent.

A better bet is that nothing will be the same. Wealth will be destroyed on a catastrophic scale, and policymakers will need to find a way to ensure that, at least in some cases, creditors take part of the hit, a process that will play out over years of negotiation and litigation. For bankruptcy lawyers and lobbyists, it will be a bonanza, part of which will come from pressing taxpayers to honor bailout guarantees. Such a scenario would be an unholy mess.

Now, imagine that, rather than shoring up markets solely via guarantees, the Fed could push most short-term interest rates across the economy to near or below zero. Europe and Japan already have tiptoed into negative rate territory. Suppose central banks pushed back against today’s flight into government debt by going further, cutting short-term policy rates to, say, -3% or lower.

For starters, just like cuts in the good old days of positive interest rates, negative rates would lift many firms, states, and cities from default. If done correctly – and recent empirical evidence increasingly supports this – negative rates would operate similarly to normal monetary policy, boosting aggregate demand and raising employment. So, before carrying out debt-restructuring surgery on everything, wouldn’t it better to try a dose of normal monetary stimulus?

A number of important steps are required to make deep negative rates feasible and effective. The most important, which no central bank (including the ECB) has yet taken, is to preclude large-scale hoarding of cash by financial firms, pension funds, and insurance companies. Various combinations of regulation, a time-varying fee for large-scale re-deposits of cash at the central bank, and phasing out large-denomination banknotes should do the trick.

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It is not rocket science (or should I say virology?). With large-scale cash hoarding taken off the table, the issue of pass-through of negative rates to bank depositors – the most sensible concern – would be eliminated. Even without preventing wholesale hoarding (which is risky and expensive), European banks have increasingly been able to pass on negative rates to large depositors. And governments would not be giving up much by shielding small depositors entirely from negative interest rates. Again, given adequate time and planning, doing this is straightforward.

Negative interest rates have elicited a blizzard of objections. Most, however, are either fuzzy-headed or easily addressed, as I discuss in my 2016 book on the past, present, and future of currency, as well as in related writings. There, I also explain why one should not think of “alternative monetary instruments” such as quantitative easing and helicopter money as forms of fiscal policy. While a fiscal response is necessary, monetary policy is also very much needed. Only monetary policy addresses credit throughout the economy. Until inflation and real interest rates rise from the grave, only a policy of effective deep negative interest rates can do the job.

A policy of deeply negative rates in the advanced economies would also be a huge boon to emerging and developing economies, which are being slammed by falling commodity prices, fleeing capital, high debt, and weak exchange rates, not to mention the early stages of the pandemic. Even with negative rates, many countries would still need a debt moratorium. But a weaker dollar, stronger global growth, and a reduction in capital flight would help, especially when it comes to the larger emerging markets.

Tragically, when the Federal Reserve conducted its 2019 review of policy instruments, discussion of how to implement deep negative rates was effectively taken off the table, forcing the Fed’s hand in the pandemic. Influential bank lobbyists hate negative rates, even though they need not undermine bank profits if done correctly. The economics profession, mesmerized by interesting counterintuitive results that arise in economies where there really is a zero bound on interest rates, must share some of the blame.

Emergency implementation of deeply negative interest rates would not solve all of today’s problems. But adopting such a policy would be a start. If, as seems increasingly likely, equilibrium real interest rates are set to be lower than ever over the next few years, it is time for central banks and governments to give the idea a long, hard, and urgent look.

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It is a common fallacy to think that people in emerging and developing economies would stop bringing their capital to the US and other "sound money" countries if they just had negative interest rates. Everyone on this planet clear in mind would prefere to hold his cash holdings or assets in Dollars, Euros, Pounds etc. then e. g. "Simbabwe dollars". Quite the opposite is true. Lots of countries and companies would start to borrow in dollars to cheaply finance their investments and consumption which increases the currency risk of those entities. The speculator has not the same interests as the investor or consumer.And what Mr. Rogoff seems not to understand is that the world commodity markets are priced in dollars. So companies using commodites, even if those commodities come from Africa or elsewhere, would prefere to hold dollars to minimize currency risk instead of local currencies.Then what is the reaction of "other" Central Banks? Does Mr. "voodoo economist" Rogoff believe that they are just watching the Fed and stay put and let their currency appreciate? What a naive view of Mr. Rogoff.The Central Banks around the world are cornered because of their faulty policies by financing every terrible economic idea through credit.

Mr. Rogoff is a voodoo economist that dreams the dream of a planned economy (of course planned by him and his evy league collegues!).The Western world has long ago left the path of a free market economy (in contrast to the believe of all evy leage economists). It can't be that bad enterprenures that have no clue about accounings are bailed out by Politicians and Central Banks each time there is a crisis! This is at the expense and higher costs of the successful enterpreneurs that are able to earn money and pay off their creditors even in hard times because they are cautious in their actions and strategies. The business model of ever expanding credit without earning one cent has to be stopped soon and not prolonged even by negative interest rates! Negative interest rates are making things even worse! Negative rates favour the risk averse enterpreneur that is building his empire on ever expanding credits with no assets and no money. Those credits are by now at levels that every big company is a thread to the finacial system. This was only possible because of the irrational actions of Central Banks since Greenspan and the phobia of savings by economists like Rogoff. Savings are a "natural" need in an economy and forcing companies or people in dissaving is just the next step in our planned economic system. We all are soon guided by a bunch of Central Bankers and academics that have no clue but rely just on sheer ignorace and faulty theories.Now should be the hour of the forward looking, cautious and risk-minimizing enterpreneur that can at least support his work force and pay his duties for a month of bad business without risking the substance of the company. But no, according to Rogoff its the time to punish him again and to bail out the risk averse and greedy enterpreneurs that expand their revenues at the expense of all others and that have no reserves even though some are in business for decades. No wonder that the worlds "best performing" companies are all Unicorns. And no wonder, with professors like Rogoff the world universities have spat out a bunch of financial jugglers that have taken over the banking system that can only be kept alive by never ending credit expansion - now only possble with zero interest and soon with negative rates!

Many interesting points made in the commentary. While having a great deal of respect for Professor Rogoff, this particular point of view, at this stage of development, seems to be lacking. If the objective is to stimulate economic growth through increasing demand, it is difficult to understand why those with access to capital would not redeploy it to assets in more attractive areas. This is a kind of economic “slop” that disconnects the analysis of real economic opportunity from deploying that capital to real potential and substantive investment return. It represents is a degeneration of that process. From the economic stimulus perspective of demand support, it appears the major effect would amount to the proverbial “pushing on a string”.This approach is just one more top down policy approach that supports the status quo of those who have the capital and the economic power to hold themselves relatively out of harms way while the less fortunate once again are required to fall on the sword for the benefit of the more fortunate. If the objective is to really stimulate demand, why not start from the bottom up and alleviate the debt burdens of those least able to sustain them, and, moreover, provide a baseline of sustainable income opportunities to support the demand required for economic growth.

It was people like Mr. Rogoff with their whacky and unproven "theories" being forced on the populace that landed us in our current predicament. Relentless ZIRP with unlimited QEs have given us anaemic economic growth totally disproportional to the amount of debt accumulation. From 2009 to 2019, the Fed's balance sheet has expanded 5x, which is a compounded annual growth of 17%. The US GDP growth over that period was 2.24% annually. Coincidentally, the S&P also went up 5x during that period. There has been almost no wage growth from 2008 to 2019. Yet, asset prices such as bonds, stocks, as well as collectibles such as artwork, fine wine etc. experienced explosive growth. So unless you are a wealthy investor, such idiotic policies are no good for anyone. Now, you want negative interest rates. The retirees who depend on interest income now have to pay for the privilege to lend the banks or Uncle Sam money ? And rich corporations, hedge funds and PE firms can have unlimited free money for stock buy backs and leveraged buyouts ? And people are not stupid enough to want to keep money in the bank so that the rich can suck it try. There is no better way to destroy the US dollar. And by the way, the S&P in units of gold made its high in 1998 (5.6 ounces), and even at the last nominal peak in Feb 2020, it was only at 42% of this high (2.4 ounces). So in terms of real money, the US stock market has lost 58% of its value in 22 years. Now the gurus Greenspan, Bernanke and Yellen don't look too smart, do they ? And when the whole house of cards falls apart in the not too distant future, these people will be seen as who they really are; a reverse Robin Hood of sorts, who rob the poor to give to the rich.

What Rogoff is talking about is financial repression. Negative rates are a tax on capital & if these pseudo scientists (economists) paid attention they would notice that growth & inflation in NIRP countries has still trended lower. Zombie firms are allowed to continue operating which destroys pricing power & weakens entire industries. Banks in Europe are losing deposits & eating negative rate costs to keep customers. These policies also failed to stimulate aggregate demand, as in Japan when savings (and safe sales) increased after NIRP was implemented to offset lack of savings vehicles. These policies also destroy pensions & the insurance industry requiring larger bailouts & government deficits, all the while the marginal utility of debt declines which lowers money velocity.

Dear Mr Rogoff, it is indeed a very good point of view,but,may I ask your opinion on cronical inflation such as Argentine economy suffers since 50 years? We have tried all medicines....thanks in advance Daniel

for the life of me I cannot understand why economists like Rogoff have refused for 30 years to let markets work; rather, every time we see an economic correction the "solution" offered is that the fed bail out investors and lenders through recklessly loose monetary policy, followed by a refusal to soak up the excess liquidity once the crisis has passed...

I wrote above: " The low or negative interest rates you refer to, are only given to depositors." Unless the borrowers are at extremely low risk of default: like the large well capitalized corporations, in normal times. The 3rd world countries Rogoff writes about are usually cash poor, so not good risks, having high risks of loan default. So would not likely receive the low or negative interest rates Rogoff speaks of?

Regards. I am not sure that negative or low interest rates are always available to all borrowers. They would only be available to borrowers who are at extremely low risks of default. That is why during the pandemic auto industry borrowers are having to pay interest rates of 9 per cent, according to The Economist. The low or negative interest rates you refer to, are only given to depositors. So they wouldn't help cash strapped developing countries who are at high risk of default.. The auto firms are paying high rates because demand for their products and their abilities to produce cars are both depleted because of the pandemic.Thanks.Jed Schwartz

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Negative interest represent a declaration of intellectual bankruptcy on the part of the economists that recommend them and any central banks that take these economists seriously. The only thing that can cause interest rates to approach zero is monetary deflation. The solution is to immediately terminate the deflation by creating whatever amount of liquidity it takes to accomplish this. not try to adapt to the deflation via negative interest rates. The Fed has infinite power. It can buy the entire earth with USD created out of thin air. Sometime between now and the time that the Fed owned the earth, the deflation would end and interest rates would return to normal levels.

Central banks should operate against a (fixed) target level for general commodity prices, and should not use interest rate targeting (IRT) at all. IRT yields a system governed by one equation with two unknowns, which is why an IRT system can run away into deflation. of the kind that we are seeing now.

Rogoff, like most economists, uses the hackney’ed pump-priming metaphor to advocate in favour of negative interest rates at -3% to boost the economy. I suspect it would be better to use a drug-pushing metaphor. The notion of temporary negative interest rates which will become permanent reflects the insanity of a system pushing heroin onto a dependent junkie. Our political and economic systems have morphed into something that is more akin to a drug addicted consumer society than a sustainable productive society that enhances wellbeing. Advertisers, politicians, financiers and their academic lackeys now push a self-destructive dependency by pushing debt-and-welfare financed fantasy-consumerism onto the unwary in the interests of the narcissists who get their hit on the adrenalin of power. It need not be so!

Economics may have perfected the superficialities of supply, demand and price driven markets herded by autonomous independent individuals, but it has done so by ignoring the desires, needs, fears, hopes and values that drive individuals as social animals. Economics may have perfected the ability to organise static systems, but it has little to say about organising dynamic systems - even though nature has ensured that our world is a dynamic system. Our political and financial interests are a short 3-4 years, but our life interests are long - 75 years, maybe 150 if one cares about descendants and maybe 3,000 if one is a spiritualist, an aesthetic or a historian.

Let me explain. After millennia of superstitious mythological life, a few hundred years ago Europeans invented a production culture which enables motivated creatives the freedom to make things that resonate with ordinary folk like you and me - satisfying needs and fantasies. The creatives build factories and offices and hire workers like you and me to help them make these things. We buy these things with the money they pay us. The creatives use financiers, who like the creatives themselves, take risks with their capital in the hope that their efforts will earn them a reasonable profit with which they will be able to satisfy their own needs and fantasies. Because some of the longer-lasting things that we want to buy cost much more than we can afford to pay on the spot or out of our savings, citizens like you and me also borrow and go into debt - wisely to buy homes and cars, unwisely to buy fantasies.

Some of the successful motivated creatives become greedy, selfish and entitled. They come to believe they are superior individuals and they forget that they live in societies which have provided an infrastructure of freedoms, laws, security, public institutions and government grants and that a significant part of their wealth derives from being well positioned by gender, colour and religion and that another significant part may be no more than a dollop of luck of being in the right place at the right time in the right network. They have more than enough money to satisfy all their needs and many of their fantasies so they turn their minds to power and become addicted to that power. They also have more than enough to buy political parties and law making, and that with those laws, they can buy the culture and change society to conform to their fantasy of how society ought to be.

Inevitably, in this system some of the creatives, workers and citizens have difficulty navigating the system and many become despondent, disillusioned, confused, and they come to act out in personally and socially dysfunctional ways - blaming themselves for their misfortune. Some become junkies, some become racists, some kill themselves, some become gun enthusiasts, some beat their wives and some become shopaholics - marginalised by fellow-citizens who have managed to navigate the system by gritting their teeth, working to buy the things they need, to save for the future, to pay off debt and to occasionally buy a few fantasies - a one-week holiday in the mountains, an occasional date night, a telephone (in the 1950s) or a cruise, a flat-screen TV, or a night out at a 2-hat restaurant (2010s).

Imperceptibly, our society morphs into a consumption society as an increasing proportion of our income is spent by an increasing percentage of the population on fantasy-goods that are sometimes satisfying and sometimes not. Sometimes we look at ourselves in the mirror, suspect that we don’t need to buy these fantasy goods, but fear being marginalised as “uncool” or making our kids “outsiders” without networks and therefore with fewer opportunities in the future. So we buy them even if we suspect we don’t really need them and even when we remember that the magic of the fantasies are often short-lived.

How do we know what to buy? We watch television to relax at the end of the day, we link up to Facebook to be in one or a number of social groups and/or we read newspapers and magazines to understand what in the world is going on so we might get some hints on how to navigate the world. Here, slick advertisements and uber-cool influencers spin our minds to believe that our fantasies are needs, enticing us to spend money using an array of financial products which increase our indebtedness. As a result, many of us need to work for longer hours than we would prefer while many others of us cannot find jobs and are forced to work shorter hours than we need to pay off the debt into which we have been enticed.

And every so often, something we are unprepared for, something unexpected happens… There is a physical or psychological accident in the family, there is a recession, a pandemic, we change our minds about the meaning of life, an evil idiot wins an election, the monetary authorities or the Treasurer screws up, a butterfly in Chile flaps its wings… we lose our job, our skills have become redundant, we are too old to start afresh or to get a meaningful job in the new economy.

We are stuffed. We used to have savings which would earn us an interest, but now Professor Rogoff wants us to pay the banks $3 for every $100 we hold in our savings!

The swiss national bank has negative rates for deposits above 10 million swiss francs so as to avoid flight into the safety of the swiss franc, which would drive its value higher and thus hamper swiss exports due to a too strong exchange rate. So if I paraphrase this paragraph the USA with negative interest rates could be some kind of a Switzerland MAX, it would stop flights into the safety of the dollars, therefore weakening the dollar which allows for advantageous exchange rates and thus easier exports, which would stimulate the manufacturing and export industries and thus also favor the import of necessary industrial commodities from developing countries while allowing those very countries to more easily pay off their debt denominated in dollars. It would also be important to remove from circulation any bank note of more than a few dollar to make it more costly to store cash in warehouses than to receive negative interest rates on large bank deposits. Wouldn^t the stock market go through the roof as well as other asset classes?

Negative rates are, in effect, the supply-side substitute to massive Federal purchases of goods and services. If we want push private savings into spending, then triple the budget deficit NOT to cut taxes or transfer income in some other way, but to spend, spend, spend. If will work better and ultimately be less destructive than negative rates.

Kenneth throwing darts without a real target is not going to solve one iota of any thing.

There is one person that perhaps has some of the awareness that is most definitely needed to work at solving the multiple layers of confusion that have been constructed without any real foundation: Roger McNamee.

Read this article:https://washingtonmonthly.com/magazine/january-february-march-2018/how-to-fix-facebook-before-it-fixes-us/

(interpret the context for relevance to present situation in time, that deeply Negative Interest Rates will not do anything at all to correct. You will find the root of the problem in concepts of Monopolization and Applied Theory)

and listen to his advice. He would be a real asset on a work team to correct some of the insanity that has developed to this point in time.

Well, negative rates didn't help Europe. Rogoff should know that. Those with money don't increase spending (why should I buy a third car or another yacht?). Those without money or a job won't get a loan as they lack credibility. In the EUro countries the low rates caused a jump in real estate prices. This can become another bank problem in case of an economic downturn. Very low or negative rates are a very risky thing. Why not try the opposite? Higher rates as a stimulus to spend has also its advocates.

I dont know how to address this presentation. Not being that knowledgeable I would start by asking a structural question: What is the role of an interest rate?If we can get a general agreement on that, the discussion of where we are, how we got here and where we go from here becomes an easier discussion. Since studying economics I have increasingly believed that "political economy" was a wiser approach to understanding human behavior defined by commerce.

People are supposed to spend their money in their own interest, so they expect to be paid interest (other meaning ) when they lend their money. Economists have made models of a (wo)man as a totally knowledgeable and reasonable actor and have lost the connection with Adam Smith and real people. This rigged market economy is bound to fail.

Sadly, I agree. The issue is, what are the global ramifications of the structure of the failure. The myopic mindset of policymakers/economists and the view that only the West(read U.S.) can resolve the issues without consequence is thought provoking. From the RTC era to 2008 to today, the obvious impetus is to protect the large scale corporate ecosystem. Although not wrong, intensity and focus has unintended consequences. I have yet to hear a major economist articulate the macroeconomic structural dynamics of a manipulated Sovereign interest rate/credit environment. As the Chinese say, "may you live in interesting times".

[Or Bitcoin, now at $9,347.] Prof. Rogoff, savers are suffering with near 0% bank rates. Whether or not institutional rates become numerically negative (real savings rates are already negative), would it not be possible for the Fed to subsidize small savers in, for example, FDIC insured accounts, with an historically reasonable real rate of return (say, 3%)? Abuses would be easy to prevent simply by limiting the dollar amount each individual could contribute by social security number.

I agree with many of the comments below, I do not see how Negative Interest Rates Policy (NIRP) will help at all, ... they have not helped Europe and Japan so far, with their languishing growths before Covid.I believe we need to learn a lesson regarding QE and ZIRP/NIRP since 2008: once they have done the job of restoring liquidity in a panic, the continuation of them tend to keep their effect within the financial system (ie inflation of asset prices, excess of bank reserves...) with some but limited trickled down effect into the real economy.It is like killing flies with bazookas.

In addition, the current Covid-19, which has initiated a crisis in the real economy (as opposed to 2008's, that was initiated in the financial economy), brings 2 new key challenges: (1) global synchronisation of the crisis and (2) destroyed consumption at large scale.Hence, the potential solutions (monetary and fiscal) should necessarily take into account these 2 challenges in the equations, and so far these have not been properly addressed.The first challenge means that the recoveries will need to be domestically driven well before any external pull from trade/exports could have any traction. The second challenge, at the light of the first one, means that priority needs to be given to restoring consumption... and time does matter.

Now, it is naive to expect that consumption will restore 'on its own', because (1) the huge amount of unemployed (that will hang on to their limited savings) and (2) the fear from the side of the still employed (which may fear for their jobs, and will save just in case).Therefore, solutions need to act heavily on the consumption side. Cheques have been mailed, which obviously will be mostly dedicated to mitigate misery and perhaps provide some extra saving, not to get people to consume. In my view, we need to devise a combination of helicopter money along with technology (digital FED-backed money, ie CBDC) that can help to 'tailor' the response, by households and by industry sectors: example, an App. that enables to access 'consumption money' issued electronically by the FED that decreases as time passes (to incentivize its usage) and cannot be used to save, even can be targeted in %s of usage by type of industry affected, types of households, etc... this money could be released in waves over time depending on watching the feedback of how sales trickled across the economy, so hopefully, the cashflow conveyor belt gets restored from consumer to retailer to wholesaler to producer... which is what is currently in 'economic ICU'. We need to use the advantage that FinTech nowadays offers to refine our monetary weaponry to fight this very unusual and threatening crisis.

"A number of important steps are required to make deep negative rates feasible and effective. The most important, which no central bank (including the ECB) has yet taken, is to preclude large-scale hoarding of cash by financial firms, pension funds, and insurance companies. Various combinations of regulation, a time-varying fee for large-scale re-deposits of cash at the central bank, and phasing out large-denomination banknotes should do the trick." Correct. By totally destroying any semblance of financial freedom, it would certainly do Mr. Rogoff's "trick". That it would destroy savers and pensioners would be mere collateral damage and besides, how better to bring an end to the post Breton Woods era than to apply this poison.

Correct. For half a century US has paid their imports partly by creating dollars out of thin air because countries needed dollars to import oil and because dollars counted as foreign reserve currency. With prof Rogoff's deep negative interest rates both functions would end.

Prof. Rogoff doesn't even considers possibility that US could have balance surplus instead of 25 trillion of debt. Solving debt problem with more debt is what got US into this mass in the first place. If debt and negative rates were a solution to every crises, why don't we all have dollar printers at home?What about free market capitalism where airlines and banks are let go bankrupt so that market cycle sarts again with new investments and new rise of economy instead of having economy on artificial support for decades until final crash of all crashes comes?

We learnt conclusively post 2008 that ridiculous amount of free money at ridiculous prices do little to stimulate an economy, simply because the banks can only lend it to those who provide security, and those with ample security are not in a mood for borrowing. A big helicopter drop with a 'use-it-or-lose-it' stipulation will go much further.

This seems like an idea that could destroy the currency and purchasing power as much as QE. Why would anyone keep money in the bank when it's guaranteed to lose its real nominal value? You can fool people through inflation but this hits depositors directly in the face. It would create even more malinvestment than we already have.

Negative rates are not going to work and they have not worked in Europe or Japan. I do not see what Rogoff sees that makes him think that they are "a first step"? If they are a first step, they are a first step to nowhere.

The problem is excessive concentration and accumulation of wealth; and trying to penalize excessive accumulation with negative rates it is simply naive. A significant portion of that wealth is in the form of debt which cannot be served. Forgive the debts, let the lenders go bankrupt (re-organize) and start the process anew. This is the solution but who dares to do it?

All debt is eventually paid. The only three questions are: 1) How, 2) When, and 3) By who?

Sometimes payment comes in the way of hard currency. Other times it takes the form of property transfers. Still other forms include taxation which are either direct (i.e. pay to play) or indirect (i.e. decreases in national standards of living).

Rogoff opens with a question: aren't negative interest rates better than FED loans and Treasury guarantees for "virtually every private, state and city credit in the economy?" But he never asks why FED action on such a scale is necessary when Congress has just approved the largest fiscal stimulus in history. Are the loans, guarantees and negative rates truly intended to stem a panic, or just to sustain a structure of wealth that wasn't well grounded in income flows even before the shocks imposed by the coronavirus? After all, asset prices (as measured by the Wilshire 5000) have tripled relative to GDP since the early 2000s, largely as a result of overly accomodative monetary policy. Under those circumstances, is further broad-based support of any kind truly warranted, or should the FED be more modest in its efforts and more discriminating in its choice of customers?

"And governments would not be giving up much by shielding small depositors entirely from negative interest rates." Yes, but let's be honest, with our current government, that's not very likely to happen.

Well this should make my savings worth about as much as used toilet paper. Economists complain people don't save enough. Then they propose policies and interest rates that make saving only for Idiots morons and the OCD. It's always nice to know exactly what worth Economists place on Main Street and it's well being. Which in this case is obviously none or less then none.

I’m sorry, there is no way anyone will save money that’s deflating at (say) 3%. If Rogoff wishes to prompt people to spend, them NIRP might do it. It could quite possibly also lead to increased poverty in retirement.

You don't save money that is diminishing in value every day. And you surely don't save money when inflation is going up and interest on savings is going down or pointless. And inflation is pretty inevitable when you have ever increasing amount of money chasing the same or fewer amounts of goods in the system. Hyperbole is often used to make a point mine was "Why on earth would anyone save money that buys and is worth less everyday?" Not to mention negative is gift to wealthy and a plague upon the poor.

Why is negative (interest rates) a gift to the rich? Without too much trumpet blowing, I regard myself as rich (retired; no debts; own & wife’s assets in the £8M range. AUM belonging to me / my wife around £8M). How do I get a gift from NIRP?

I think concern re "shielding small depositors entirely from negative interest rates" is unnecessary. I'm a retired small depositor, I have minimal $$$ in savings accounts or CDs, my retirement funds are all in the stock market, like everyone else's. My savings account pays 0.15% interest - pretty close to negative. As Krugman pointed out last week, the market is staying up because there's no place else to invest that has any decent ROI.Also, if there were ever a time to quit pretending that descriptive MMT principles aren't true, it is now. I was glad to see in the opening paragraph "the Federal Reserve – supported both implicitly and explicitly by the Treasury – is on track to backstop virtually every private, state, and city credit in the economy. " This is exactly what we need, but we also need the Fed to "backstop" every US citizen.

You might choose paper gold instead. I wouldn’t be so sure that the price of gold would rise. It hasn’t during the last few decades in which time it’s arguable that all sovereign currencies have been debased & are running on the credibility of fumes.Real gold costs money to keep, is difficult to spend anywhere near par, in a crisis & will be a continuing cause of worry to it’s owner (because of the risk it’ll be stolen).Ten years ago I ran an analysis to help me decide whether to hold physical gold. By the time I’d reached ten names of people & companies who would inevitably know that I had some at home, I decided that not being murdered for some yellow metal had a lot going for it.

Agreed. Hence the thinking about physical gold (though rejected it). Actually what I might do if I’m forced by events to spend (on the use it or lose it) cash is to buy rare cars & motorcycles. I’d love to enjoy my investments more than I do at present.

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Mass protests over racial injustice, the COVID-19 pandemic, and a sharp economic downturn have plunged the United States into its deepest crisis in decades. Will the public embrace radical, systemic reforms, or will the specter of civil disorder provoke a conservative backlash?

For democratic countries like the United States, the COVID-19 crisis has opened up four possible political and socioeconomic trajectories. But only one path forward leads to a destination that most people would want to reach.

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